Olympus 2013 Annual Report Download - page 24

44 OLYMPUS Annual Report 2013 45OLYMPUS Annual Report 2013
Review of Business Segments
Challenges and Business Strategies
There were two fundamental factors that resulted in the
decline in profi tability in the Imaging Business. One was the
unexpected degree of contraction in the compact camera
market. The other was our delayed response to this shrinking
market. In order to address both of these issues, we have
restructured the Imaging Business and defi ned risk minimization
as the core policy for future business development.
Previously, we managed this business with the aim of
expanding the scale of sales. However, we have since
changed our focus to prioritize preventing losses.
Based on this directive, we have defi ned the following
three basic policies.
1 Minimize risks in compact camera operations
The main culprit in the decline in profi tability was compact
cameras. For this reason, we have signifi cantly reduced
sales volume targets to minimize risks. In particular, we
will cease the future development of models in the V Series
of low-priced models, and we are focusing on reducing
inventories. With regard to high-priced compact cameras,
we will only develop and sell models that realize signifi cant
technological synergies with mirrorless cameras. In
conjunction with these measures, we have halved our
fi scal 2014 sales volume targets for compact cameras,
which represent an exceptionally conservative stance in
comparison to the market projections released by the
Camera & Imaging Products Association (CIPA), or, in
other words, the collective opinion of the industry.
2 Focus resources on high-margin mirrorless cameras
Olympus is highly competitive in the Japanese market for
mirrorless cameras, holding the top share of approximately
30% in the domestic market. As we reduce the scale of our
compact camera operations, a portion of the management
resources freed as a result will be allocated to the growing
mirrorless camera market as we strive to effectively utilize
our resources. In terms of sales regions as well, we will
direct marketing primarily toward major cities, where
mirrorless camera demand is expected to grow. Likewise,
emphasis will be placed on sales channels that are highly
suited to mirrorless cameras, such as specialty stores and
the Internet. By strategically allocating resources in this
manner, we are committed to realizing solid growth that
parallels that of the market.
3 Improve responsiveness to market changes
In the future, the efforts of both management and business
divisions will be incorporated to conduct real-time
monitoring of business plan progress and, thereby, expedite
decision making. The market has the potential to change at
any moment. In recognition of this, we will install systems
that enable us to quickly minimize inventory risks and
implement appropriate cost control measures in response
to market changes.
In addition to these policies, Olympus is working to drastically reform the cost structure of the Imaging Business.
Manufacturing systems were also signifi cantly reorganized,
with the fi ve sites previously used in this business
consolidated into two. We believe this will contribute to
improvements in production effi ciency during fi scal 2014. In
addition, we will greatly decrease the number of compact
camera models developed, which will lead to a decline in
R&D expenditures and sales-related costs and allow us to
reduce the number of employees in development,
manufacturing, and sales divisions. Overseas sales bases will
also be reorganized to reduce costs and facilitate sales of
mirrorless cameras, with bases being consolidated and sales
channels selectively limited to those deemed highly effi cient.
Through these efforts, we are targeting a total reduction of
approximately ¥23 billion in manufacturing costs and SG&A
expenses. This should enable us to breakeven on an
operating income basis in fi scal 2014 and put us in a position
to further emphasize mirrorless cameras in fi scal 2015 and
onward, thereby developing a business structure that can
secure profi ts in the range of several billion yen.
0
40
80
120
160
116.9
14.6
115.2
13.3
95.1
12.5
90.3
13.7
2011/3 2012/3 2013/3 2014/3
(Forecast)
–30
–10
–20
0
10
20
0
(10.8)
(23.1)
(15.0)
2011/3 2012/3 2013/3 2014/3
(Forecast)
Net Sales
(¥ Billion)
Operating Loss
(¥ Billion)
Digital cameras Others
IMAGING
BUSINESS
Minimize risks in
compact camera operations
Improve responsiveness
to market changes
Focus resources on
high-margin mirrorless cameras
1 2 3
Haruo Ogawa
President,
Imaging Group
Message from the Group President
We will pursue solid growth while minimizing risks in consideration of
market changes.
In accordance with the policy of risk minimization, we will signi cantly shrink our lineup of low-priced compact cameras
and expand operations in the growing mirrorless camera market. Our  rst target will be to breakeven on an operating
income basis by controlling costs so that they remain at a level that is appropriate to our business scale.
Fiscal 2013 Business Results and Activities
In the fi eld of digital single-lens refl ex (SLR) cameras, the
OLYMPUS OM-D E-M5, a highly functional, mirrorless
camera equipped with an electronic viewfi nder and the
world’s fi rst 5-axis image stabilization system, recorded
higher sales both in Japan and overseas. In compact
cameras, sales were strong for new high-value-added
camera models, such as the TG-1 and TG-2 high-
resolution compact cameras that feature Olympus-levels
of toughness and bright F2.0 lenses. However, the
spread of smartphones led to the rapid shrinking of the
market for low-priced compact cameras. As a result, both
sales volumes and selling prices were down for these
cameras, and overall net sales for the Imaging Business
decreased accordingly.
Throughout fi scal 2013, product mix revisions,
manufacturing function revisions, and SG&A expense
reduction measures were implemented. Unfortunately, the
benefi ts of these efforts were outweighed by the drop in
net sales, and the operating loss grew as a result.
Business Environment and Projections
The compact camera market is rapidly contracting
due to the spread of smartphones, and this market
is expected to shrink by about 20% in fi scal 2014.
Conversely, the mirrorless camera market, an area the
Company will emphasize going forward, is expected
togrow by an average of 20% per year for the
foreseeable future.
Initiative FY2014 (YoY)
Improve manufacturing cost ratio by shifting to mirrorless
cameras (adjusting product mix) + ¥4 billion
Reduce costs by reorganizing manufacturing systems + ¥3 billion
Reduce costs by decreasing inventory expenses + ¥4 billion
Lower R&D expenditures by reducing number of models, etc. + ¥3 billion
Reduce expenses by consolidating sales bases and channels + ¥2 billion
Implement other reduction measures (IT/distribution
expenses, system revisions, etc.) + ¥7 billion
Total reductions Approx.
+ ¥23 billion
Reduction Targets for Manufacturing Costs
and SG&A Expenses